GnuCash vs. Quicken

[Rich Shepard]

On 4 Dec 2002, Roland Roberts wrote:

>     I am having a bit of trouble wrapping my mind around
>     double-entry accounting.  I asked my accountant friend about
>     this and he said  "Forget it - keep on using Quicken!  For your
>     personal finances double-entry accounting is overkill and you
>     will soon get tired of it!"
> 
> Your friend is mistaken.  Quicken's single-entry approach allows you
> to make horrible mistakes.

  Allow me to elaborate. I've posted responses to this question in the past,
but it is a legitimate complaint. First, the context: I'm not an accountant,
but I've used double-entry bookkeeping since 1986 for my personal funds
(starting with MoneyCounts on DOS) and since 1993 for my business accounts.
As an aside, when I started using gnucash my problem was not understanding
double-entry bookkeeping, but figuring out how gnucash implemented it. Now
it's a no-brainer (except that I keep hitting the [Enter] key in the middle
of a transaction instead of the [Tab] key). Sigh.

  Double-entry bookkeeping is a simple idea: every transaction has two
parts. One part describes where the money originates, the other part
describes where the money goes.

  Examples:

  You get your paycheck and deposit it in your bank. Within gnucash you can
handle this in one of at least two ways.

	1) You have two accounts: a Current Asset bank account and an
Income/Salary account. When you make your deposit in gnucash, you debit the
Asset account (which increases its balance; that's where the opening balance
goes, too), and you credit the Income account.

	2) You have a Current Asset checking account, an income account and
liability accounts for withheld taxes. Again, you credit the _gross_ amount
of your pay into the Income account. But, this time, you make a split
transaction for the other side: the _net_ amount is debited to your Asset
(checking) account and the withheld taxes are credited to the tax liability
accounts.

  When you write a check, you fill in the payee's name, correct? Well, in a
double-entry bookkeeping system you track the payee as well as the check
number, date and amount. Here, you will credit (decrease) your Asset
(checking) account and you'll debit (increase) the Expense account. What
this does is two things: it makes sure that you account completely for every
transfer of money and it lets you see how much you spend on each type of
expense or each vendor (store).

  BTW, as I'm not an accountant, I keep a hand-written table of what ledger
account is debited and what is credited taped to the computer desk here.
Despite doing this for years, when I need to check which side is "increase"
and which is "decrease" for a new transaction I look at my table. :-) BUT,
the important part is that gnucash makes it easy for you. I use the
accounting terms in my registers, but I think there's a non-accounting term
option, too.

  You won't get tired of it. Instead, you'll find so much useful information
that you'll wonder why you didn't do this years ago.

  If it would help, I'll post on this mail list the accounting ledger crib
sheet I created.

HTH,

Rich

Dr. Richard B. Shepard, President

                       Applied Ecosystem Services, Inc. (TM)
            2404 SW 22nd Street | Troutdale, OR 97060-1247 | U.S.A.
 + 1 503-667-4517 (voice) | + 1 503-667-8863 (fax) | rshepard@appl-ecosys.com
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